Texas Attorney General Ken Paxton sued Amazon.com Inc. on Aug. 31, alleging the company deceived Texas businesses about how it prices the advertising they buy on its platform. According to the attorney general’s office, Amazon promised advertisers a competitive auction but secretly manipulated the process to charge them more.
The lawsuit targets a system that touches thousands of Texas businesses. More than 18,000 Texas sellers and vendors advertise on Amazon across billions of auctions, the office said, and most are small businesses and authors who depend on prominent placement in search results to make sales.
Amazon sells advertising space through auctions that run in a fraction of a second each time a shopper searches, according to the Aug. 31 release. The office said Amazon described these as second-price auctions and told advertisers they “only pay the least bid amount needed in order to win.” The state alleges that claim was false, and that Amazon stopped running a second-price auction years ago while continuing to describe one in its marketing materials, training videos, developer guides and help pages.
In its place, the attorney general’s office alleged, Amazon applies hidden surcharges and undisclosed “soft reserve” prices that push the winner’s cost toward its own maximum bid, by roughly 17 percent on ordinary shopping days and more than 25 percent during peak events like Prime Day. The office said advertisers now pay their own bid nearly 80 percent of the time, and that in 2024 alone the hidden surcharges generated roughly $4.5 billion in additional revenue for Amazon nationwide. Advertisers cannot check the math, the release said, because Amazon provides no record of competing bids or how prices were calculated.
“Amazon lied to Texas small businesses and charged them for an auction it never ran, which raises prices for job creators and Texas families. I will not allow this multi-billion-dollar corporate scam to go unchecked,” Paxton said in the release. “Amazon must tell Texas job creators the truth about what they are buying and what they are paying for it.”
The state brings its claims under the Texas Deceptive Trade Practices Act and seeks civil penalties of up to $10,000 per violation, according to the release. It also asks the court to order Amazon to stop describing its auctions inaccurately and to give every Texas advertiser a record of each auction showing the bids, any surcharge applied and the final amount charged.
The office noted that the Federal Trade Commission, FTC Chairman Andrew Ferguson and a coalition of other states filed a separate action against Amazon in federal court the same day concerning the company’s practices. Amazon’s response to the allegations was not included in the release.